Pranab terms RBI's move to raise key rates "appropriate" | business | Hindustan Times
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Pranab terms RBI's move to raise key rates "appropriate"

business Updated: Jul 04, 2010 17:19 IST

Finance Minister Pranab Mukherjee on Sunday described the the RBI's move to increase the short-term lending and borrowing rates to contain double-digit inflation as "appropriate".

"So far as interest rate is concerned, there is 25 basis points increase in repo and reverse repo rates... It is appropriate, welcome measure," he told reporters on the sidelines of an Assocham conference.

The steps taken by the central bank, he added, "will be subsumed in the new policy statement which will be issued in the later part of the month by RBI."

On whether there could be further hike in the monetary policy review which is due later this month, he said, "The RBI board will come up with its policy on July 27. Let us wait till then."

Weeks before its scheduled policy review on July 27, the RBI on Friday evening raised the short-term lending and borrowing (repo and reverse-repo) rates by 25 basis points to 5.5 per cent and 4 per cent, respectively, to check rising inflation.

Wholesale prices-based inflation crossed double digits (10.16 per cent provisionally) in May, but as per final figures, the rate of price rise has been 11 per cent or more since February. Food inflation eased to 12.92 per cent in the third week of June from above 16 per cent.

Justifying its mid-course action, the RBI had said, "The developments on the inflation front, however, raise several concerns... Food price inflation and consumer price inflation remain at elevated levels. There has been some moderation in food price inflation, but the price index of food articles continues to increase."